A.M.A. Murugappa Chetty vs N.V.N. Nachiappa Chetty and Another

Stone, J.—In this case the plaintiff is suing defendant 1 personally and defendant 2 in respect of his share in the joint family property for the

sum of Rs. 12,000 with interest on the principal sum of Rs. 10,000 with half-yearly rests calculated at Re. 0-12-6 per cent, per mensem until the

date of decree and thereafter at 6 per cent, on the total amount until realisation in the following circumstances. On 17th November 1930 defendant

1 went to the plaintiff and asked him to give a letter that would enable him (defendant 1) to obtain from the plaintiff''s Madras Office the sum of Rs.

10,000. That was a matter that took place outside the jurisdiction of this High Court. A letter was given which empowered the holder of that letter

to go to the plaintiff''s Madras firm and require the plaintiff''s agent at Madras to pay at Madras to the order of defendant 1 Rs. 10,000 together

with the nadapu rate of interest from 17th November 1930 to the date of presentation and debit the said amount in the name of defendant 1 and

note on the letter that payment had been made. To follow out the history of that letter I will go somewhat out of historical sequence. Defendant 1

did not take that letter to Madras, did not present it for payment at Madras and was not paid by the plaintiff at Madras, but he endorsed it over to

a third party at a place outside the jurisdiction of this Court add that third party took it to Madras received the money at Madras and the fact of the

receipt by that person is endorsed on the letter. Now to return to the sequence of events, after that letter had been given, defendant 1 gave to the

plaintiff a promissory note which is expressed to be payable on demand, no place of payment being mentioned. The relevant part of it is as follows:

The amount due by me (defendant 1) by reason of baying received from you (the plaintiff) a hundi directing me (defendant 1) to receive the money

with interest from your Madras firm is Rs. 10,000. For this amount of Rs. 10,000 the interest shall be calculated at Re. 0-12-6 per cent, per

mensem and the total of the interest and principal I (that is defendant 1) shall on demand pay you (the plaintiff) or your order and get a return of

this promissory note.

Upon that is endorsed

for the sum of Rs. 10,000 mentioned in the pro-note herein I shall pay interest at Re. 0-12-6 per mensem once every six months.

That promissory note was given at a place outside the jurisdiction of this Court. On 27th October 1932 on behalf of the plaintiff a lawyer''s letter

was sent to defendant 1, the material terms of which are as follows:

In respect of the promissory note executed by you in favour of our said clients for Rs. 10,000 with compound interest thereon at Re. 0-12-6 per

cent, per mensem with half-yearly rests there is now due and owing by you to our clients the sum of Rs. 10,000 for principal and rupees 1,449-0-

6 for Interest making in all a total sum of Rs. 11,449-0-6 and that you have in spite of repeated demands failed and neglected to pay the amount

due.

They thereupon gave notice that payment must be made within ten days or proceedings will be taken. No action was taken on that letter and

payment was not made. The only other fact that it is necessary to mention is that in the debit and credit account of the plaintiff there appears as

credited to the defendant the sum of Rs. 470-3-6 which is made up of the interest and interest on interest due on the promissory note at the rate

above mentioned, that is, Re. 0-12.6 per cent, per mensem with six monthly rests. The defence is that those facts disclosed only one cause of

action and that cause of action is upon the note, and, if upon the note, this Court has no jurisdiction. Alternatively, or rather in addition, it is said

that the cause of action, assuming there is a cause of action on the loan, does not arise within the jurisdiction of this Court. With regard to the

contention that in circumstances like these the plaintiff is restricted to his action on the note, the question was considered by Fletcher Moulton, L.J.,

as he then, was in A Debtor, In re (1908) 1 K.B. 344 . Fletcher Moulton, L.J., there observes as follows:

A parallel case where a bill is taken in payment for goods sold, exactly illustrates what in the effect of taking a bill. It is perfectly true that it is only a

conditional payment. It is a payment if the bill is paid; and if it is in your hands when it becomes due and is dishonoured the debt revises. But if you

have availed yourself of the character of the bill as a negotiable-instrument, and have passed it out of your possession so that the right to proceed

on that bill is vested in some one else and not in you at the date of the dishonour, the suspension of the debt continues just as much as if the bill was

not overdue. A moment''s consideration will show that the Courts would not be administering justice if they did not hold this to-be the case,

because otherwise you could sue for the price of the goods, while another man, through possession by your act of the negotiable'' instrument which

had been given for the price, could make the debtor pay the amount over again. Therefore I am satisfied that it is a fundamental principle applying

to all cases where bills are taken either in satisfaction of a debt or In suspension of the exercise of any legal, rights, that the satisfaction or the

suspension lasts only so long as the bill is not overdue, unless you have parted with it so that another person is dominus of the bill, and then it lasts

until you have got it back into your possession.

Now in this case the bill is in the possession of the plaintiff and in this case the demand letter of 27th October 1932 is a demand for payment in

respect of the promissory note executed by defendant 1; that is to say, it is a demand for the payment of the note. This is a case of a demand

promissory note not payable at any particular place and therefore falls within the exceptions to Section 64, Negotiable Instruments Act, and

thereupon no presentation is necessary to make it overdue. So that here there has been a demand, there has been; no payment, there is no need

for presentation; therefore on the demand having been made, no payment having been, made and the time allowed having expired, the note

became overdue. As it has become overdue and as it is in the possession of the plaintiff and is therefore within the case mentioned by Fletcher

Moulton, L.J., the plaintiff is, in this position; he can either sue on the note or he can put the note on one side and sue on the debt. But it is said that

there is a long line of cases to show that there can be no debt where there is a promissory note taken contemporaneously with the loan so that you

have only one transaction, and in support of that proposition the following cases have been mentioned : Saminathan v. Palaniappa (1913) 41 I.A.

142, Y.V. Ragavayya v. G. Ramayya (1905) 29 Mad. 111, Muthu Sastrigal v. Visvanatha Pandarasannadhi AIR 1914 Mad. 657 and Sheikh

Akbar v. Sheikh Khan (1881) 7 Cal. 256. Of those authorities I am of course bound by Saminathan v. Palaniappa (1913) 41 I.A. 142 which is a

decision of the Judicial Committee of the Privy Council delivered, I observe, by Lord Moulton as he then was. As I read that case, he is reiterating

once again what he said in A Debtor, In re (1908) 1 K.B. 344. The Debtor Ex parte (1) when he says : ""So long as the notes were outstanding

there was no right of action otherwise than upon the notes"" and he is saying that for the reason that he has mentioned at p. 350 of the previous case

in the passage that I have quoted. I am also of course bound by Y.V. Ragavayya v. G. Ramayya (1905) 29 Mad. 111 which is a decision on the

appellate side of this High Court. But as I read that judgment it does not in the least conflict with the conclusion that I am arriving at in this case and

is in my opinion enunciating the same legal principles as were stated by Fletcher Moulton, L.J. As to whether the original cause of action is the note

itself and/or whether there is also another cause of action, that in my opinion is a question of fact, and on the facts here it seems to me to be too

clear for argument that there are two causes of action. Had the transaction in question stopped with the giving of the letter empowering defendant 1

to go to Madras and collect Rs. 10,000, it would not be arguable but that the plaintiff had a cause of action springing out of the contract of loan.

What is there that makes the letter given by defendant 1 to the plaintiff and a promissory note to secure the repayment of that loan a merger or a

novation extinguishing the earlier contract and turning these two contracts into one, a contract contained in a promissory note? I cannot understand

under what principle of law the first contract is to be regarded as extinguished. It seems to me that this is a case such as is mentioned in Sheikh

Akbar v. Sheikh Khan (1881) 7 Cal. 256:

When a cause of action for money is once complete in itself, whether for goods sold or for money lent, or for any other claim, and the f debtor then

gives a bill or note to the creditor for payment of the money at a future time, the creditor, if the bill or note is not paid at maturity, may always, as a

rule, sue for the original consideration, provided that he has not endorsed or lost or parted with the bill or note, : under such circumstances as to

make the debtor liable upon it to some third person.

There the Chief Justice of Calcutta is expressing precisely the same point that Fletcher Moulton, L.J., was expressing in A Debtor, In re. The

Debtor Ex parte (1) and that in my opinion is exactly this case, a contract of loan followed by the giving of a promissory note to secure its

payment, a case that happens thousands of times a year so far as England is concerned in that department of life connected with money-lenders.

That being so, it seems to me that here the plaintiff could if he chose have sued on the note and be can if he chooses sue on the debt. He has

chosen to sue on the debt. Now be next point arises, that being so, has this Court jurisdiction to entertain this claim? That will depend in my

opinion upon this: is it necessary for the plaintiff, properly pleading the relevant facts on which to found he claim, to mention any fact that is a

relevant fact which arose within the jurisdiction of this Court? What he has to allege is a loan and what he has to show is that he has made a loan;

and although for myself I am a little doubtful whether the long series of decisions on this point of jurisdiction do not somewhat loosely regard

pleading points and regard as relevant points that I should have somewhat doubted were necessary to be pleaded, agreeably to that long line of

decisions I am satisfied that a plaintiff would have been regarded as pleading relevantly if he had alleged in his plaint ""I did in fact advance this

money in Madras"" and I think that in this case that would have been a necessary allegation because it was a term of the contract that he should

advance the money in Madras, and before the plain, tiff could have sued on the contract that the plaintiff made, it would be necessary for him to

allege performance of the terms on his side of the bargain. He would thus have to allege (1) a term that he was to give a letter that would enable

money to be paid at Madras, (2) the fact that the amount so to be paid depended upon the date of collection at Madras, (3) the date of collection,

(4) the fact of payment. So he would have to allege inter alia (1) the date of presentation of that letter, and (2) the payment on that letter; and both

presentation and payment must be at Madras.

It follows from that that part of the cause of action has arisen at Madras and from that this Court has jurisdiction. There is however this

difference between suing upon the original contract of loan and suing upon the promissory note. I have had no evidence, and it does not appear

from the documents put before me, that there has been any special agreement for interest apart from the note. It is upon the note that the

endorsement is made with regard to a particular rate of interest payable with, six monthly rests. That in my opinion : is part of the contract related

to the promissory note and has nothing to do with the contract of loan. In order to find the terms of the contract of loan I must, I think, look at the

contract of loan which was concluded, so far as the evidence goes, at the time that the letter authorising defendant 1 to collect Rs. 10,000 in

Madras was given. The subsequent variations were all the variations of the terms of the promissory note which is another contract. Looking at it

like that, it appears to me that what defendant 1 has undertaken to do is to have made against him a debit of the amount paid to him or the person

to whom he endorsed this note and to re-pay that debit. What is the amount of debit? The debit is Rs. 10,000. His contract therefore is to return

Rs. 10,000. There is no provision with regard to interest. With regard to interest however I, am entitled as from the date of the notice demanding

the payment of this sum, although that notice is a demand for the payment under the note, I am entitled, I think, to give interest at a reasonable rate.

There will therefore be judgment for Rs., 10,000 together with interest at 6 per cent, from 27th October 1932 to the date of payment with

proportionate costs against defendant 1 personally and against defendant 2 to the extent of the assets in his hands.